Maryland recovers $81 million from Medicaid technology contractor

The state of Maryland recovered $81 million from a contractor that officials said botched efforts to rebuild the state’s Medicaid computer system, Attorney General Brian Frosh announced Friday.

The state terminated its $170 million contract with Computer Sciences Corp. in 2015 after complaining for a year about the company’s work. The state had already paid about $27 million to the company, much of it coming from federal funds.

Frosh sought to recover not just the amount directly paid to CSC but millions more that the state and federal governments spent patching the existing system. The system was built in 1992 and is still used today by the state health department to manage Medicaid accounts, including the $10 billion paid out to Medicaid providers each year.

“We are pleased with the settlement, but the state’s damages were considerably more in this case,” Frosh said after the settlement was announced. “There was not only the amount paid to CSC but the amount the state had to pay to fix the system afterward and put it in shape so it could be used.”

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Frosh had sought $500 million, which includes a tripling of damages. But CSC countered that it was still owed payment for extra work performed to meet fluctuating federal technology standards for Medicaid systems.

CSC officials declined to comment Friday.

Frosh said the settlement resolves claims by both the state and the company.

Northern Virginia-based CSC was hired in 2012 for the five-year technology contract, with three possible two-year extensions.

The total value of the work was estimated at $297 million, according to a release issued by CSC when it won the contract for the Medicaid Enterprise Restructuring Project. CSC was also supposed to operate the system once it was completed and running.

CSC merged with the Enterprise Services business of Hewlett Packard Enterprise to create DXC Technology in 2017.

After a nearly yearlong dispute with the contractor, Computer Sciences Corp., the state Department...

Frosh said the state will work with federal officials to divide the recovered money. Federal agencies had paid about 90 percent of the costs, officials said at the time the contract was terminated.

“They funded a lot of the project, and we’ll have to negotiate how much the feds get,” Frosh said. “Our ultimate expenses exceeded $81 million. Our damages exceeded that amount.”

The settlement comes several years after Frosh settled another claim for $45 million against the prime contractor on the state’s online insurance marketplace, created under the Affordable Care Act for people who do not get insurance through their employers. The site crashed on the first day it was used in 2014 and had to be replaced with new technology.

State officials had envisioned one website for people to sign up for private insurance coverage or enroll for or renew their Medicaid plans if their incomes were low enough to qualify for government benefits. The health exchange and the Medicaid systems are now linked.